Southern California

Rehab Clinics Under Federal Scrutiny for Fraud, Neglect

Soaring addiction rates combined with millions of people insured under the Affordable Care Act created a tsunami of money pouring in for treatment.

The rehab Riviera is a nickname some insiders use to describe the explosion of drug treatment centers around Southern California.

The NBC4 I-Team has been examining the growing number of rehab clinics, and why many are coming under federal scrutiny for allegations of fraud and neglect. Battling addiction and mental health problems is a billion dollar industry.

Soaring addiction rates combined with millions of people insured under the Affordable Care Act created a tsunami of money pouring in for treatment. But the biggest cost some say is the damage and neglect to patients seeking treatment.

Less than a year ago, a 28 year old who asked to be identified as "Steve" was revived with three shots of Narcan, a drug that reverses an overdose.

"I got really scared and I said this is the end," he said. "God gave me another chance."

For Steve the drugs began at 19.

"I spent about $2,300 a day on drugs," he said.

Out of control, he vowed to get clean on the day he was saved. He searched for a rehab facility and found one in Palm Desert owned by Sovereign Health, one of the largest rehab and behavioral health companies in the country.

"When you call they promise you that we are going to go hiking, we are going to take you horse riding, swimming," he said. But he said none of that happened. After a few days of detox he says he was moved to a Sovereign sober living home.

"It was like a party house," he said.

Instead of getting clean, Steve said he was introduced to harder drugs.

"I took only pills, my first time when I shot heroin, it was at Sovereign."

Nineteen days later he says he begged his father to take him home.

"I got help at home. I didn't get any help there," Steve said. "We serve 15,000 patients," said Sovereign Chief Executive Officer Tonmoy Sharma, pointing to the hundreds of positive testimonials on their YouTube channel.

"There will be some people that may not be happy with us. It's a service industry like a hotel, like an airline. Somewhere someone will complain about baggage fees."

Mick Meagher, a health care attorney, said there is no safety net.

"There is no check system," he said.

He believes the rehab business is in need of tougher laws and better oversight by the state. He's restructured troubled rehab programs as a consultant and says patients need better protection.

As a lawyer, he's defended clients sued by Sovereign. In one case Meagher represented a couple who protested the opening of a Sovereign facility. The couple said the facility did not have the proper license. In another case Meagher represented a blogger who republished and old article related to Tonmoy Sharma’s medical credentials.

His wife is CEO of a nonprofit treatment facility on the central coast.

"You have to understand between Orange County and LA County, just these two counties alone, there are over 1,000 licensed treatment centers and only 1 person to check them all," said Meagher.

In June the FBI and several other agencies executed search warrants at multiple locations of Sovereign Health here in Southern California, including a treatment facility in Culver City and its San Clemente headquarters.

Law enforcement officers were seen removing computers and multiple boxes of paper files. The search warrants remain are sealed. The specific allegation have not been made available to the public or to Sovereign.

In August Sovereign filed a motion with the court to have the search warrants unsealed.

"I call them the Gestapo," Sharma said.

But Sharma said the language in the warrants is identical to allegations made in a lawsuit by insurance company Health Net, which claims Satya, an affiliate of Sovereign "has engaged in illegal, improper and fraudulent conduct on a massive scale."

The lawsuits alleges, "within an 11-month period, Satya went from billing Health Net under $50,000 a month to more than $13 million per month."

"Where is the private jet? Where is the island?" Sharma said. "We have invested whatever we have back into the organization."

Sharma says the Health Net lawsuit is retaliation for a lawsuit first filed by Sovereign against the insurer. Sharma says the insurer stiffed his business for $55 million dollars in unpaid bills.

"We have the Department of Justice acting as the private arm of Health Net," Sharma said. "The company that is on the wall of shame."

Health Net sent NBC4 a statement saying that that they are "unable to comment on active litigation." Sovereign isn't a stranger to legal battles. The city of San Clemente sued Sovereign last year.

In an 11-count complaint they allege Sovereign operated without a business license and provided treatment and clinical counseling services without a state license. The California Department of Health Care Services also cited Sovereign for treating patients in unlicensed facilities.

Currently all Sovereign's facilities are licensed. "We are obsessed with quality," Sharma said. "And part of that quality is compliance."

But Steve said after his experience, he thinks Sovereign has a financial motivation too. He showed NBC4 a bill for his 19 days in treatment. The total — $38,000, with more than $10,000 for drug tests performed in a Sovereign owned lab.

"They didn't provide a service," he said.

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